It's one of the most common questions that we get as Real Estate professionals:
Are interest rates going to go up in the near future?
And, although we certainly don't have a magic crystal ball (we SO wish that we did!), we look to the experts to pass along their predictions. This information was just released by Freddie Mac, and we think it's important to note that as rates go up, purchasing power goes down.
The 30-year fixed-rate mortgage is getting closer to moving over 4 percent, as mortgage rates climb for the second week in a row. Freddie Mac reports that fixed-rate mortgages are rising in anticipation of a possible rate increase by the Federal Reserve and a recent strong jobs report.
"A surprisingly strong October jobs report showed 271,000 jobs added and wage growth of 0.4 percent from last month, exceeding many experts' expectations, says Sean Becketti, Freddie Mac's chief economist. œThe positive employment reports pushed Treasury yields to about 2.3 percent as investors responded by placing a higher likelihood on a December rate hike. Mortgage rates followed, with the 30-year jumping 11 basis points to 3.98 percent, the highest since July. There is only one more employment report before the December FOMC meeting, which will have major implications on whether we see a rate hike in 2015."
Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 12:
- 30-year fixed-rate mortgages:averaged 3.98 percent, with an average 0.6 point, rising from last week's 3.87 percent average. Last year at this time, 30-year rates averaged 4.01 percent.
- 15-year fixed-rate mortgages:averaged 3.20 percent, with an average 0.6 point, increasing from last week's 3.09 percent average. A year ago, 15-year rates averaged 3.20 percent.
- 5-year hybrid adjustable-rate mortgages:averaged 3.03 percent, with an average 0.4 point, climbing from last week's 2.96 percent average. A year ago, 5-year ARMs averaged 3.02 percent.
- 1-year ARMs:averaged 2.65 percent, with an average 0.2 point, increasing from 2.62 percent last week. A year ago, 1-year ARMs averaged 2.43 percent.
So, what does all of this mean for you?
If you are thinking of making a move of any kind in the next few months, it might be better to do it sooner rather than later....winter might not seem like the most obvious time to sell your home, buy a home, or purchase investment properties but here are a few reasons why it might make sense, in addition to rising interest rates.
According to Realtor.com, most of the households created over the past two years have beenrentinghouseholds, but based on U.S. Census data for the third quarter of this year, it appears that homeownership has started to recover.
This especially makes sense now that it ischeaper to own than rentin more than three-quarters of the counties in the U.S, including Denver. And it's not getting better rents are rising year over year at twice the pace of listing prices. Meanwhile, mortgage rates remain at near record lows but appear poised to increase over the next year. And home prices are rising, too.
So if you qualify for a mortgage and have the funds for a down payment and closing costsand if you intend to live in a home long enough to cover the transaction costs of buying and sellingyou will be better off financially if you buy as soon as you can. After all, if you are tired of your current
Thetop factors driving home shoppersthis summer were pent-up demand and recognition of favorable mortgage rates and home prices. These drivers will likely remain well into next year.
Yetdemand for housing is extremely seasonal. In most marketsin the country, we are conditioned to believe that we should buy homes in the spring and summer. So come each October, plans to purchase shift to the spring. While the school calendar and weather do influence the ideal time to move, many buyers would benefit from buying this fall and winter rather than waiting until next spring.
In October, the percentage of would-be buyers onrealtor.comsaying that they intend to buy in seven to 12 months was the highest it has been all year and represented the largest time frame for purchase. Likewise, October produced the lowest percentage of would-be buyers saying they intend to buy in the next three months.
In other words, people's stated plans point to a very strong spring for home sales. Great, right? But here's the problem: Inventory isn't likely to be higher in March and April than it is now. And while inventory should grow inlatespring and into summer, it won't grow as fast as the seasonal demand.
So, if you are ready, consider getting in the market now instead of early spring. You will have more choices and less competition, and you can lock in today's rates rather than risk rates being 25 to 50 basis points higher. (A basis point is 0.01 percentage point.)
A 50 basis-point increase in rates (for example, from 4.05% to 4.55%) would cause monthly payments to be 6% higher. And that increase would not only affectyour monthly cash flow but could also affectyour ability to qualify.
If you have questions about any of this information, or if you just need to talk over your situation with an experienced agent, contact us.
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